We present two approximation methods for the pricing of CMS spread options in Libor market models. Both approaches are based on approximating the underlying swap rates with lognormal processes under suitable measures. The first method is derived straightforwardly from the Libor market model. The...

Kolodko and Schoenmakers (2006) and Bender and Schoenmakers (2006) introduced a policy iteration that allows the achievement of a tight lower approximations of the price for early exercise options via a nested Monte Carlo simulation in a Markovian setting. In this paper we enhance the algorithm...

In this paper we introduce efficient Monte Carlo estimators for the valuation of high-dimensional derivatives and their sensitivities (''Greeks''). These estimators are based on an analytical, usually approximative representation of the underlying density. We study approximative densities...

We present an iterative procedure for computing the optimal Bermudan stopping time, hence the Bermudan Snell envelope. The method produces an increasing sequence of approximations of the Snell envelope from below, which coincide with the Snell envelope after finitely many steps. Then, by...

In this paper we introduce efficient Monte Carlo estimators for the valuation of high-dimensional derivatives and their sensitivities (Greeks). These estimators are based on an analytical, usually approximative representation of the underlying density. We study approximative densities obtained...

In this article we propose a novel approach to reduce the computational complexity of the dual method for pricing American options. We consider a sequence of martingales that converges to a given target martingale and decompose the original dual representation into a sum of representations that...

In this paper we propose a jump-diffusion Libor model with jumps in a high-dimensional space (m) and test a stable non-parametric calibration algorithm that takes into account a given local covariance structure. The algorithm returns smooth and simply structured Levy densities, and penalizes...